A: You are correct.
B: "Stop!" would be a warning -- for example, you're in the passenger seat of a car and see someone step out into the road in front of the car; you might shout at the driver to "Stop!"
"Stop it!" is when you want somebody to stop doing something which annoys you, or you consider to be wrong. For example, someone might be whistling loudly and out of tune while you're trying to work; you'd then say, "Stop it!"
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